Abbott's announcement comes two days after Canberra lifted its terror alert level to "high" on growing concern about Australian jihadists returning from fighting in Iraq and Syria.
Abbott said the deployment of about "400 air personnel and about 200 military personnel" followed a formal request from Washington for Australia to contribute to the international coalition against the rampaging Islamist group.
He said Australia was "not deploying combat troops but contributing to international efforts to prevent the humanitarian crisis from deepening".
"Nevertheless, Australia is prepared to engage in international operations to disrupt and degrade ISIL (IS) because of the threat that this murderous death cult poses not just to the people of Iraq, not just to the people of the Middle East, but to the whole world including to Australia."
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The US has been working to forge a coalition against IS jihadists in Iraq and Syria, with Secretary of State John Kerry in the Middle East to shore up Arab support.
The defence force was also preparing military advisers to assist Iraqi and other security forces tackling IS, the prime minister added in a statement.
Abbott said the deployment was focused on Iraq and not Syria.
"At this point in time, Australia is not intending to operate in Syria," he said.
"The legalities of operating in Iraq with the consent and welcome of the Iraqi government are obviously very different from the legalities of operating in Syria, which has a government that Australia doesn't recognise."